USD/MXN in a tight range after mixed Mexico GDP data

The USD/MXN price was little changed on Wednesday after the latest Mexico GDP data. It is trading at 19.860 where it has been in the past few weeks and 23% below its highest level in 2020.

Mexico GDP data

The Mexican economy expanded by 0.8% in the first quarter after rising by 0.4% in the previous quarter. This was a better performance than the median estimate of 0.6%. On a year-on-year basis, the economy contracted by 3.6% after declining by 3.8% in the previous quarter. That was worse than the median estimate of 3.5%.

According to the statistics agency, tertiary activities grew by 0.9% while primary GDP rose by 0.7%. Similarly, secondary activities grew by 0.5% on a quarter-on-quarter basis.

The economy is expected to have a strong recovery in the second quarter helped by the fast recovery of the American economy. Indeed, recent data from the US have been relatively strong. Retail sales has surged, the housing sector has boomed, and the labour market has tightened. This is good news for Mexico because the US is its biggest trade partner.

Further, the Mexican economy will also do well because of the higher prices of crude oil. The price of Brent has jumped to almost $70 per barrel while the West Texas Intermediate (WTI) has jumped to $67. This is substantially higher than where they were at the same time last year. This is important since Mexico is a leading exporter of crude oil.

The Mexico GDP data came a day after the country’s president said that he will not reappoint the current Banxico governor when his term ends in December this year. Unlike other emerging market central banks like those from Turkey and Brazil, Banxico has not hiked interest rates.

USD/MXN technical outlook

The daily chart shows that the USD/MXN pair has been in a tight range in the past few days. The pair is trading at 19.86, which is slightly above the important support at 19.55, which was the lowest level this year. It is also slightly below the 25-day moving average and the descending trendline that connects the lowest levels on June 30, September 25, and March this year. Therefore, while the consolidation is expected to remain, there is a possibility that the air will have a bearish breakout in the near term.